On May 15, 2020, the SBA issued its Paycheck Protection Program (PPP) Loan Forgiveness Application, which you can find here . The application also includes instructions. Below is a summary of some of the issues on which Borrowers have sought guidance. 
While the term of the “Covered Period” (CP) for loan forgiveness has not changed – this is still the eight-week period that starts on the first date of disbursement of the PPP loan – under the new term “Alternative Covered Period” the SBA will allow Borrowers to begin the eight week period on the first pay day following loan disbursement and continue for eight weeks thereafter. Borrowers who elect to use the optional APCP must apply it consistently throughout the loan period and the standard Covered Period still must be used to calculate “covered” costs other than payroll (rent, utilities and mortgage interest).

The SBA provided some important clarifications with respect to the calculation of “payroll costs”:

  • Payroll Costs are “paid” as of the day that paychecks are distributed or the employer originates an ACH credit transaction;

  • Payroll Costs are “incurred” as of the date that the employee’s pay is earned; and

  • Payroll Costs incurred but not paid during the Borrower’s last day of the Covered Period or APCP are eligible for forgiveness if paid on or before the next regular pay period.
Borrowers must provide the name, last four digits of the SSN, and Cash Compensation for each employee (list in separate tables employees who had an annual compensation of $100,000 for any pay period in 2019 and those who did not).

The term “Cash Compensation” means the sum of gross salary, gross wages, gross tips, gross commissions, paid leave (not including leave covered by the Families First Coronavirus Response Act (FFCRA)), and allowed for dismissal or separation paid or incurred during the CP/APCP. 

Health Insurance: Employers must provide the aggregate amount paid for employer contributions for employee health insurance, excluding employee contributions (because this will be included in the “gross” salary/wages listed under the Cash Compensation component) during the covered period or APCP. 
Retirement Plans: Employers must enter the aggregate amount paid for employer contributions to employee retirement plans, excluding contributions by employees, during the covered period or APCP.
State and Local Taxes: This includes only the amount paid by the borrower/employer. The SBA specifically clarified that unemployment insurance payments made to the state may be included.

The application also provides with respect to eligible non-payroll costs:

  • Non-payroll costs include non-payroll costs paid and non-payroll costs incurred during the Covered Period and paid on or before the next regular billing date, even if that date is after the Covered Period.


The new guidance clarifies that forgiveness will be reduced if the salary or hourly wages of employees during the Covered Period was less than during the period from January 1, 2020 through March 31, 2020.  This clarification allows Borrowers to use an average or annualized rate and a consistent period of time (first quarter 2020) as opposed to a variable period – the last quarter prior to loan disbursement – to calculate the reduction.


The new guidance provides that Borrowers may calculate FTEs in one of two ways:
Option 1 : For each employee, calculate the average number of hours paid per week during the relevant period, divide by 40, and round to the nearest tenth, with a maximum of 1.0; or
Option 2 : Assign 1.0 for each employee who works 40 or more hours per week and 0.5 for each employee who works fewer than 40 hours per week.

Forgiveness is not reduced where:

  • Borrower has made a good-faith, written offer to rehire the employee during the Covered Period or APCP and the employee rejects the offer.
  • An employee is fired for cause; voluntarily resigns or voluntarily requests and receives a reduction in hours.


  • Covered Mortgage Obligations excludes prepayments – even if prepayments are permitted under the mortgage.
  • Covered Rent Obligations may include both real and personal property obligations.
  • With respect to Borrower’s certifications (particularly with respect to necessity) the SBA states that a Borrower’s eligibility for loan forgiveness will be evaluated in accordance with the PPP regulations and guidance issued by SBA through the date of the forgiveness application. 

For more information on the PPP program and the forgiveness application process, please contact one of the members of our experienced COVID-19 Response Team listed below.
This alert is intended to notify its readers of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have. We are fully operational during this pandemic and we stand ready to assist your business with any of the aforementioned benefits. Please do not hesitate to contact us with your questions and concerns.
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